IMPACT: 33% will be the drop in Engro
Fertilizers’ 2012 earnings
if it follows suit and
decreases prices.

KARACHI: In a bid to regain the local market, Fauji Fertilizer Company (FFC) has reduced urea prices to make its fertiliser competitive against cheaper imports.

The fertiliser manufacturer cut down prices by 9% to Rs1,650/bag on Thursday, bringing the difference between the local and imported fertiliser to Rs50 per bag.

Local fertiliser manufacturers have so far been second best to their imported counterparts in 2012 as the price of imported fertiliser is subsidised by the government.

FFC’s unsold fertiliser stock stood at a massive 250,000 tons at the end of March, according to latest data.

In line with historical trend, other market players are also expected to follow suit. The reduction in price will make a huge impact on profit margins. Engro Fertilizer’s will be hit the most as earnings will shrink by 33% while Fauji Fertilizer Bin Qasim earnings will drop 8% if they follow suit and drop prices, according to InvestCap analyst Hasan Raza.

The government’s reliance on imports has eased the demand of the commodity for now, however, this will have a huge hit as far as the country’s fiscal management is concerned as the fertiliser import bill reached $848 million during the first seven months of the current financial year against a total of $300 million during same period last year.

Going forward, urea prices may face more pressure from an expected increase in gas prices from July 2012 and potentially higher Gas Infrastructure Development Cess charges. The price change will be effective from today (Friday).

Reader Comments (2)

Various studies indicate the marketing hype created by fertilizer companies created a big demand among the farmers. This excessive use of chemicals has drastic effects on land, and high costs. Importantly there should be programs on television on the use of fertilizers, when, and how it should be used. How the cost could be reduced. The fertiliser companies (giants) in profits, and size should provide free service in crop failures, and forecasting of crop due to the coming weather for certain crops (essential) grains, corn, fruits and vegetables. This should be social service of the fertiliser companies how to optimise the use of fertiliser, and weather forecasting and crop for the season with satellite alogrithms of the weather viz-a-viz crop.
With the subsidised natural gas, and cheap labor, the companies are making fat margins.

Fertiliser companies should be hit below the belt for amassing lot of profits at the expense of poor farmers. Last year the prices were about 1100 and then skyrocketed to 2000 for 50kg bag. How in the world this thing could be accepted.